Rights of Owners who buy off-plan properties in Spain
The rights buyers of an off-plan property are included in the “Real Decreto 515/1989 of consumer protection” and in the Law 38/1999 of Building Regulation.
According to this law, it is important to bear in mind one important aspect of the purchase process, which is the publicity the developer will create for the project as this will intervene, in most cases, decisively in the buyer’s decision to buy.
The advertising of the development must be objective and true and should not cause confusion to the consumer in relation to the characteristics and conditions of the property. Likewise, it must be indicated if the building is finished or is under construction.
Before proceeding with the signature of the reservation contract, the developer must provide to the buyer, as consumer, the following information:
- Full information of the company who is building/financing the project.
- Within respect of the property: plans, technical specifications, price, current state of the construction and Land Searches of the property and building works license. In addition, and in case the property has been finished, the developer must provide the buyer with a copy of the energy efficiency certificate, a copy of the license of first occupation, as well as statutes and rules of the community, if applicable.
- Regarding the price: the total price will be clearly informed, including real estate agents fees, if applicable, taxes and payment method. Likewise, the seller must declare if there is any type of charge or encumbrance on the property and the type of guarantees that will cover the payments to be made.
Once the property to be purchased has been chosen, a reservation contract will be signed, a reservation will be paid by the buyer and the property must be taken off the market, reserved under the buyer’s name.
It is important to keep in mind that the amount paid as reservation will act as a guarantee of compliance for both parties, seller and buyer. Thus, if the buyer unilaterally withdraws from the contract, he will lose the delivered amount and if the seller is the one who desists unilaterally, he must pay to the buyer double the amounts received back.
After the signing of the reservation contract, the next step will be the signing of a private purchase contract. This contract shall contain at least the following information:-
- Identification of the parties.
- Description of the property including any relevant information that the consumer should know.
- Total purchase price, including any payable taxes.
- Date of hand over of the keys. Usually it is agreed that a specific automatic extension is granted, although it is advisable to agree a penalty for the case of a delay in the delivery.
- Completion date.
- Current charges on the property, in case any exist.
- Taxes and expenses. If nothing is specified in the contract, the buyer is responsible for the notary fees, the registration fees and corresponding taxes. While the seller must pay the plusvalia and any registration and notary fees of the original deed of horizontal division.
- Consequences of the resolution or breach of the contract.
- Date and signature of the parties.
The contract must be written in a clear and simple way, complying with the requirements of good faith and balance between both parties.
Any abusive clauses will be invalid, such as those in which the buyer is forced to subrogate in the developer’s mortgage or pay any expenses that the developer must assume, amongst others.
From the moment the purchase contract is signed to the moment the keys of the property are handed over at completion, it is usual that the buyer has to proceed with the payment of several instalments as agreed in the contract. It is important to know that the amounts paid on account of the purchase price must be guaranteed by an insurance or bank guarantee, for which the seller must deliver to the buyer the corresponding policy or document that proves this.
According to the legislative change introduced in the Law of Building Regulation, which is effective since 1 January 2016, the amounts paid on account for the construction of a property, will be guaranteed only from the moment the developer has obtained a building works license. According to the Law, the guarantee will be “a surety bond signed with insurance entities duly authorised to operate in Spain, or through a solidary guarantee issued by duly authorised credit institutions”.
In case of non-compliance by the developer, the term to demand responsibilities to the guarantor will be two years.
Once the work has been completed and the promoter has obtained the license of the first occupation, the sale will be signed in a public deed before a notary, at which time the guarantee will no longer be valid, and must be returned to the developer.
After handing over the keys and the corresponding possession of the property, the builder must respond for defects and defects in the construction, which are the following:
|Delay||Material Damage Covered||Direct Responsable|
|One year||Vices or defects of execution that affect elements of completion or completion of the works||Builder|
|Three years||Material damage caused to the building by defects or defects in the construction elements or facilities that cause the breach of the basic requirements of habitability.||Promotor
|Ten years||Material damages caused to the building by defects or defects that have their origin or affect the foundation, the supports, the beams, the floors, the load-bearing walls or other structural elements, and that directly compromise the mechanical strength and stability of the building||Promotor